Spy enjoyed a highly amusing few craft beers with a portfolio manager specialising in Chinese small caps this week. With China’s stock market frothier than a cheap cappuccino, Spy’s companion was all smiles. When the government is cheerleading to buying stocks, it is no surprise the rally has been so powerful. The PM told Spy, “This rally is like riding the back of a tiger. Crazy, wild, dangerous and hugely exciting. Memories of the brutal 2015 sell-off seem to have faded for many. The question is how does one get off the tiger safely before the inevitable correction arrives.” Indeed. Caveat Emptor.
Federated Hermes has had a change, notes Spy. Lin Chew, who was director for business development at the Anglo American firm in Singapore, has stepped down. Spy has not confirmed where she is moving to. However, he believes she will remain with the industry. Spy understands that Federated Hermes is in the middle of recruiting someone to replace her. Jake Nilsson remains in charge of distribution for Asia-Pacific at the firm. Federated Hermes announced last month that Kunjal Gala, co-manager of its Global Emerging Markets strategy will take over exclusively when industry veteran, Gary Greenberg, retires in 2022. Federated Hermes has had success in the last 12 months with its Impact Opportunities Equity Fund, which is up more than 10%.
There has been much excitement among the gold bugs this week. Nearly $40bn flowed into gold-backed ETFs in the first half of 2020. This has exceeded the previous annual record. It highlights demand from investors who see that central banks are printing like crazy. The gold price, now above $1800, is up nearly 20% for the year. Impressive. But not nearly as impressive as the figures the active managers have been producing. Some of the returns in their precious metals and mining funds are making tech look shy. BlackRock, JP Morgan Asset Management, Schroders, Ninety One AM and Merian Global Investors (now part of Jupiter) have all been blowing the lights out. Their leading gold funds are all up at least 40% over the last year and Ninety One’s is up about 60%. Gold itself tends to merely hold its value over the long term and, with timing, make short-term tactical gains. However, real money is made by playing the miners too and active management is particularly suited to this, in Spy’s humble opinion.
Every now and then Spy spots something pithy that sums up the situation perfectly. This week it was a comment from Fidelity’s cross asset specialist, Anthony Doyle. He posted, “Things that are extinct: dinosaurs; Tasmanian tigers; a risk-free return.” Looking at developed market government bonds or US treasuries, it is indeed true that there is simply no return to be had without risk. If you want a return, even the tiniest, inciest, winciest, polka-dottiest return, you are going to need to take some risk. It is a 2020 fact of life. Pension managers, look at the table below of central bank rates and weep.
Is Singapore’s Variable Capital Company (VCC) structure working out, wonders Spy? More than 70 VCCs have now been set up, according to data from Singapore’s ACRA and apparently another 50 or so are currently in development. That is a healthy start for the new structure that is competing with Luxembourg Sicavs and Dublin OEICs. Building an asset management industry takes time but there is no substitute for positive, supportive government policy. Spy would not be surprised in the least if Singapore succeeds in its fund ambitions over the next decade.
Speaking of Singapore, it is election day in the Lion City. Singaporean politics is usually about as exciting as watching lacquer work dry. Since independence, the PAP’s iron control has not really wavered. Every now and then a little wobble comes along and a few seats are lost. Most recently in 2011, discontent reared its head and the PAP, to much surprise, lost a so-called multi-seat Group Representative Constituency, leading to some fairly radical changes in policy and massive investment in transport to ease voters’ concerns. Will 2020 hold many surprises? All seats are being contested today, something that has only happened once before, so upsets are certainly possible. Spy would, however, not bet much that anybody other than the PAP will be in charge when the results come in. Considering what a mess the world and Hong Kong is in right now some reassuring stability from the tropics would be most welcome.
What is more painful, root canal dental surgery or being a Tesla short-seller? Spy reckons the latter. In fact, he reckons the shorts may opt for dental surgery just to numb the pain. Tesla’s meteoric rise has the doubters running for cover. The shares soared above $1400 this week making it the world’s most valuable car company. One asset manager not unhappy about this must be Baillie Gifford, the firm held about 6.5% of Tesla through its various funds as of May 13th. BG’s Scottish Mortgage Mortgage Trust has Tesla as its biggest holding at 11.1%.
You remember the good old days of tripping around Asia on business trips, visiting private banks, institutional investors and family offices. At the end of a long day of meetings, sometimes room service is the only thing that appeals. The only problem was, the lag between ordering some Thai green curry or char siew pork and it actually arriving in your room, was typically tediously long. Well, Spy may have some good news for you. PuduTech, a Chinese robotics maker, has developed several efficient food delivery robots that are already, eh, working in hotels, hospitals and office buildings. The firm has just had $14m of new investment from delivery giant Meituan Dianping as it expands abroad. Spy can only hope that these little robots can whisk food around large hotels at lightning speed and finally make room service worthwhile. Now we just need to be able to get flying again.
Spy’s band of photographers has spotted some new advertising from Schroders. The giant billboard in Central Hong Kong is promoting its Asian Asset Income Fund.
Until next week…